MCO Leather Goods manufactures leather purses Each purse req

MCO Leather Goods manufactures leather purses. Each purse requires 2 pounds of direct materials at a cost of $5 per pound and 0.7 direct labor hours at a rate of $19 per hour. Variable manufacturing overhead is charged at a rate of $2 per direct labor hour. Fixed manufacturing overhead is $13,000 per month. The company\'s policy is to end each month with direct materials inventory equal to 30% of the next month\'s materials requirement. At the end of August the company had 4,680 pounds of direct materials in inventory. The company\'s production budget reports the following. Production Budget Units to be produced September October November 6,700 4,600 6,600 (1) Prepare direct materials budgets for September and October (2) Prepare direct labor budgets for September and October (3) Prepare factory overhead budgets for September and October.

Solution

September October Budgeted production 4600 6700 Materials requirements per unit 2 2 Materials needed for production 9200 13400 Budgeted ending inventory 4020 3960 Total Materials requirements 13220 17360 Budgeted beginning inventory 4680 4020 Materials to be purchased 8540 13340 Direct materials cost per lb. 5 5 Total budgeted direct materials 42700 66700 2 September October Budgeted production 4600 6700 DL hours required per unit 0.7 0.7 Total direct labor hours needed 3220 4690 Direct labor rate per hour 19 19 Total budgeted direct labor 61180 89110 3 September October Total direct labor hours needed 3220 4690 VOH rate per DL hour 2 2 Budgeted variable overhead 6440 9380 Budgeted fixed overhead 13000 13000 Total budgeted factory overhead 19440 22380